Key Tronic (KTCC) Q2 2026 earnings summary

Executive summary

• Q2 FY2026 revenue was $96.3M, down from $113.9M year-over-year, mainly due to reduced demand from longstanding customers, program transitions, and delayed launches; gross margin fell to 0.6% from 6.8% year-over-year.

• Strategic initiatives included winding down China manufacturing, right-sizing Mexico operations, and ramping up U.S. and Vietnam facilities to mitigate tariffs and geopolitical risks, with $10.5M in related charges.

• New program launches in automotive, pest control, and industrial equipment, with significant investments in Arkansas and Vietnam facilities.

• Adjusted net income for Q2 FY2026 was break-even, compared to an adjusted net loss of $4.1M last year.

• Positive operating cash flow of $6.3M in Q2 FY2026, up from $1.3M year-over-year.

Financial highlights

• Q2 FY2026 net loss was $8.6M ($0.79/share) vs. $4.9M ($0.46/share) year-over-year; six-month net loss was $10.8M ($1.00/share) vs. $3.8M ($0.35/share) prior year.

• Adjusted gross margin for Q2 FY2026 was 7.9%, up from 6.8% year-over-year, reflecting exclusion of one-time charges.

• Q2 operating margin was -10.7%, impacted by restructuring charges.

• Operating cash flow for the six months was $14.0M, up from $11.5M year-over-year.

• Debt reduced by $13.4M year-over-year.

Outlook and guidance

• No forward-looking guidance for Q3 FY2026 due to macroeconomic uncertainty and timing of new program ramps.

• Management expects revenue to gradually rebound and a return to profitability by end of FY2026, with anticipated break-even net income driven by new programs and cost savings.

• Expect continued growth in U.S. and Vietnam production, with double-digit growth anticipated in Arkansas and major expansion in Vietnam.

• Backlog as of December 27, 2025 was $139.1M, expected to increase with recent program wins.

• The company expects to maintain sufficient liquidity for at least the next 12 months.